I absolutely agree. If immersion heaters were now plugged into the grid and could be switched on at times of high supply, they would be a great source of storage on the network.
I do not want to take too much time, but I also mention one of my favourite discoveries of this year: the flywheels at Culham. A little-known fact of our grid is that the fusion research unit at Culham demands a huge burst of power in order to work, and it was deemed to be too great a demand to place on the grid. So, in the 1970s, flywheels were installed, which are still operating today, based on the flywheels that operate in Dinorwig. This is another example of fantastic engineering that solves a problem. I am dwelling on all these examples because I think they really show that, as our energy system transforms itself and as we embark on this road with, I hope, a very clear and unswerving purpose, we will solve many of the problems and obstacles that have been cited today as insuperable. Innovation in engineering is something we excel at and I expect that noble Lords will come forward with many more examples.
I turn to the amendment and the requirements to introduce a strategy and set a target. I am at times a little sceptical about the setting of targets, but I am very supportive of the idea of a strategy. Representatives
from the industry have told me that they are very confused about how to interact with the Department of Energy and Climate Change. There is not a single point person in the department who really has an overview of this issue, and they have asked if we could raise that issue and ask that it be prioritised and given a home within the department. They tend to feel that they are being passed from side to side, with no-one taking overall responsibility for it. I think that is in part because the definition of “storage” is not quite clear, and this hits at a core issue. Dinorwig is classed as a generator and holds a generating licence, but if you have an Economy 7 storage facility in your home, you are not a generator. Lots of technologies may emerge that are somewhere in between because they are both absorbers and generators of power. They could offer very particular services to the system. Is there a need for a separate licence category for such operators? The Government need to think about this and perhaps come to a conclusion. In the course of writing a strategy, I am sure that this is one of the things that needs to be addressed.
This becomes particularly important in relation to the distribution network operators. We tabled amendments in earlier Committee sittings to tease out the fact that the DNOs are currently preparing the business strategies which they will implement over the next eight years. It is my strongly held belief that the capacity mechanism within this Bill, if it is done correctly, could have a dramatic effect on the introduction of electricity storage, and therefore should have a material impact on the DNO strategies. We have said before that it seems crazy to be signing off on DNO strategies before the detail of this Bill and the capacity mechanism within it is fully worked through.
The Electricity Storage Network, which is the relevant trade association, has pointed out that support for electricity storage is currently available. It is not quite clear from the briefing whether the grant is worth £30 million or £50 million, but it is clear that the Government are making available some tens of millions of pounds for grid-scale demonstrations of storage. That is very welcome indeed. However, the association makes a point which makes sense to me: if you spend that kind of money on the demonstration but you do not have a policy to secure the route to market, that is effectively wasted money. What the sector is really looking for is a clear signal that it will be able to participate in the capacity mechanism and that there will be a way in which it can compete against the other potential sources of capacity that will be brought forward. The problem is that we are dealing with what is essentially quite a new set of technologies which is facing all the challenges that you would associate with that. Potentially, these technologies could be commercially viable, but they are not yet. How can they compete in a capacity market that essentially seeks to be technology neutral and provide one price for all? This is a contradiction in the proposals being made by the Government that really needs to be thought through.
The Bill makes it clear that on the supply side, when it comes to supporting low-carbon electricity supplies, the Government have accepted that we need a tailored strategy for the different technologies. We have differentiated strike prices as well as different
treatment for nuclear and renewables—and within the renewables category, there is an enormous difference in approach. The reason for that is that the Government recognise that in bringing forward the low-carbon economy, it is not just a question of the least cost initially because these technologies are at different stages of development. The Government have expressed a desire to bring forward a range of technologies and not simply to compare them all against levelised cost. It is more subtle than that. Those interests may include the ability to establish a supply chain, which might have a material bearing on how we support certain technologies. The Government have gone so far as to create a levy control framework which is split up into the different technologies and potentially into different sizes of technologies, and even into different locations. I say that because on the supply side it is clear that the Government accept that one size fits all will not work and that different policies need to be brought forward in order to help all the various technologies at their different stages of development.
The demand management and reduction side is thrown out of the window and we are told that all technologies must be able to compete on a level playing field. What I would argue is that that simply will not work for those technologies which are less far along the development curve. Those include electricity storage, which has huge potential and will be very important, but at the moment would find it extremely hard to compete against the existing coal-fired generators, with gas that has just been mothballed or, indeed, potentially with new CCGT, although I hope it would be able to compete with it. I would simply state that on the supply side, the Bill recognises the need for differentiated approaches, but when it comes to the demand side we take a completely different approach. I would like to hear from the Minister what the justification is for those very different approaches. I am sure that she will respond by saying “the least cost”, but if it is a question of the least cost, the argument should apply to both sides. There must be something different on demand to which we are applying a different logic, and I would like to hear what it is.
2.15 pm
I could make many other points but perhaps the final question is whether the Green Investment Bank could be given a new category of projects to fund. It has quite tight constraints on what it is allowed to fund, but electricity storage would seem to be a very interesting area for it. Perhaps we can add this to the list of technologies that it is able to support. I am very supportive of the amendment and am delighted that it was tabled, thus enabling us to have this very interesting debate.